# How to Prepare for a Recession?

**Published by:** [Katic](https://paragraph.com/@katic/)
**Published on:** 2022-05-30
**URL:** https://paragraph.com/@katic/how-to-prepare-for-a-recession

## Content

Just 2 years ago, in 2020, the world experienced one of the worst economic downturns since the Great Depression. And within 2 years we are talking about another looming recession. While there are reasons to believe a recession today won’t be as bad as the one in 2020 or 2008, a recession of any magnitude causes harm to society. People will lose their jobs or fail to find one. The stock markets will collapse, reducing peoples’ savings and upsetting their retirement plans. And if history is any guide, recessions tend to hurt low-income groups the most. However, most people go through a recession without any significant impact whatsoever. So there is no need to panic about the possibility of a recession. But it pays to be prepared. You can protect yourself and your loved ones by planning ahead of time. ❄️ Story Time ✍🏼 When I graduated in 2020, I walked right into a recession. Several students from my batch found their placement offers being revoked or deferred during the nationwide lockdown. Salary hikes, promotions, and bonuses were either canceled or indefinitely postponed. No one could have predicted the pandemic, let alone be prepared for it. But, in hindsight, if I had the knowledge of recession and economic cycles, I would have done things differently. The signs of an imminent recession were evident in 2019 when India experienced an abrupt economic slowdown. Now, with the threat of another global recession on the horizon, I want to share my learnings, so you are better equipped to fight any potential economic downturn. But before that, it’s time for.. A Crash Course on Economics 💸 GDP, or Gross Domestic Product, is a popular indicator of how well or badly an economy is doing. It measures the productivity of businesses, governments, and individuals. The GDP of an economy usually increases over time. However, the growth doesn’t occur in a linear fashion; it follows a cyclical pattern. 🌀 This cycle, called the economic or business cycle, constitutes phases of expansion and contraction. The expansion phase is associated with high household demand for goods and services, so businesses increase their spending and hire more workers to meet the rising demand. Salaries and employment-rate go up during this growth phase of the economy. The peak of the expansion phase is when the economy reaches a saturation point, and maximum growth is attained. During this period, employment is at the maximum level, businesses are booming, and stock prices are at their peak. As the wise rapper, Eminem once said in his popular hit, Lose Yourself, “Snap back to reality, ope there goes gravity”. What goes up must eventually come down. 📈 In the downward or the contraction phase of the economic cycle, wages and employment rate begin to decline due to various reasons like drop in consumer spending due to high inflation, interest rate hikes, or external events like war, pandemic which forces the businesses to cut their expenses and lay off employees. This period, characterised by a significant decline in economic activity and a high unemployment rate, is called Recession. Made popular in 1974 by economist Julius Shiskin, his rule of thumb to spot a recession is ‘two consecutive quarters of declining GDP’. How to get recession-ready 👷🏽‍♂️? Invest in yourself: The only investment that will always pay off regardless of the economic climate is an investment in yourself. Learn skills and technologies that are in demand in the job market. Become so good at a specific skill that people cannot ignore you. Graduate into a job: Companies around the world are instituting a hiring freeze and laying off employees. Off-campus opportunities are getting scarce. So it is incredibly important that you graduate into a job. Else things are going to get really difficult in your professional career. Try to graduate into a healthy economy. Unfortunately, that is not entirely within your control. But if you find yourself graduating into a recession without a job, consider going for an MBA or Master's or an online degree program. Use this time wisely to reevaluate what you really want to do with your life. Most recessions are brief. And in 2 years, when you complete your Master's, the economy will most likely be steaming ahead with a strong job market. Send that cold mail: You need to know at least five to ten people you could call right now to get a job. Use platforms like LinkedIn and Twitter to connect with people from your industry. Sending a connection request on LinkedIn is not enough. Build a relationship with them. Figure out how you can be helpful and offer to help even if you aren’t looking for a job. Share insightful content on LinkedIn so many people can discover you, which increases your chances of serendipity. Attend networking events, find like-minded people and collaborate on side-projects. The true value of networking lies in helping others and doing so without expecting anything in return. And when you finally want something, all the universe (your network) will conspire to help you achieve it. Have an emergency fund: Most of you might have heard about emergency funds and the importance of having at least six months of income as an emergency fund. This should be your top priority now. Having cash reserves of 6 months gives you the cushion to tackle any unexpected events like a pay cut or lay-off. Do not get tempted to put some of your emergency funds in the market. Your emergency fund must be in cash or ultra-liquid funds, which do not have any market risk attached to it. Work in a recession-proof industry: Although no job is entirely safe from recession, few industries are more resistant to the recession than others. You don’t have to be an economist to identify recession-proof industries. Look around you. People will continue to pay for their basic needs like food and clothing even when the times are tough. As a rule of thumb, remember that need-based industries are recession-proof, and want-based industries are recession-prone. Some examples of recession-proof industries are Consumer Staples, Healthcare, Education, Law Enforcement, Cosmetics, Accounting, Media, Discount retailers etc., which perform well regardless of the economic cycle. Conclusion 🏁 These are some of the strategies you can follow to prepare yourself. Become proactive in the face of a coming recession, rather than reacting to it. And hopefully, you will survive and thrive in the tough times that are about to come. “Tough times don't last, tough people do.” -- Robert Schuller Thank you for reading! 😘

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